“I relied on my savings:” Crypto investors move after accounts are frozen
Months ago, Sydney, Australia-based Hamish Tipene took out two loans from Celsius Network. By buying a new home above the pre-approval rate, he strongly supported the cryptocurrency lender’s motto “Unbank Yourself” and used the cryptocurrency as collateral instead of selling it for cash.
But when the value of the crypto began to plummet a week ago, the security tips for the loan dropped rapidly, and he got a margin call. He had to add more security.
Before he could, Celsius Tipene’s account froze, making it impossible to meet the margin requirement in time. The company liquidated 0.59 of one bitcoin, a value of 11,800 dollars at today’s exchange rate. He now faces a new margin call that will wipe out another $ 13,000 in bitcoin, but while the account is still frozen, he faces the same dilemma.
“I tried to reach them for several days. “You can not remove someone’s ability to resolve a situation and then punish them for not resolving it,” the 46-year-old carpenter told Yahoo Finance. “I trusted them with my savings, and that’s unfair.”
Last year, cryptocurrencies gave retail investors the chance to secure wealth through what for many seemed like an opportunity to make money once in a lifetime. Now that the tide is drawing for risky assets with cryptocurrencies hit particularly hard, investors are reassessing confidence in some crypto firms, including the Celsius Network, after companies took drastic steps in the face of a liquidity crisis.
Crypto’s total market value has fallen by more than $ 237 billion since the release of May’s hot inflation data, from $ 1.15 trillion to $ 913 billion on Monday morning, but since its peak in November, the figure has lost 70% – over two-thirds of its value – according to Coinmarketcap.
Used to delivering high returns for investors and growth to shareholders during the beef market, industry players are now withdrawing capital from several major trading venues, including Robinhood, Gemini, Crypto.com, BlockFi and Coinbase, and announcing significant layoffs.
Then there’s Celsius.
The company offers high-interest accounts, often misunderstood as savings accounts at the bank level, to retail investors. According to their website in early May, Celsius had 1.7 million users and had $ 12 billion in customer funds, most of which are retail.
For over a week, the company has frozen its customer accounts to stabilize operations. But the move has also made it more difficult for customers to meet margin requirements, as in Tipene’s case.
For Northern California-based Yevhenii Marchenko, he does not have access to $ 85,000 in Solana, Cardano and Chainlink cryptocurrencies locked on the platform. He has been a customer since November when the crypto market reached its peak.
“Almost all YouTube crypto-related channels recommended Celsius, which is why I thought it was safe,” he told Yahoo Finance, adding that he had more confidence in Celsius for being a US-based company. – It is a very difficult and depressing situation.
Celsius has also offered little in the way of securing its financial health, which has led both customers and spectators to speculate whether the company “risks insolvency”, which will jeopardize any additional collateral offered by investors.
Celsius has hired restructuring lawyers as well as bankers at Citigroup. Meanwhile, some of the customers gather around the case to sue the company.
“As unsecured creditors, we are basically at the back of the line in bankruptcy law,” Ben Armstrong, a crypto-influencer and Celsius customer, explained to Yahoo Finance. “We still probably won’t get more than $ 1 each, but at this point it’s for me to hold Celsius accountable.”
Behind the content brand and company, Bitboy Crypto, which boasts over 3 million social media subscribers, Armstrong has promoted Celsius by running a paid affiliate program for the company on their website, in addition to appearing as a guest on Celsius’ own podcast.
But as the value of cryptocurrencies declined over the past two weeks – Bitcoin down 29% for the month – Armstrong began threatening the company and its founder and CEO, Alex Mashinsky, over social media with a class action lawsuit. According to Armstrong, $ 2 million to $ 3 million of Bitboy Crypto’s own money is currently stuck on the platform.
“I’m already considering the money is gone. This is about standing up for all the people who watched my channel and trusted Celsius. They’re not going to be able to absorb a loss the way I can, ”Armstrong said, noting that he has discussed possible scenarios with his lawyers. “This is about holding these people accountable for what they have done.”
While small investors may have a lower chance of getting their money back from Celsius in a bankruptcy scenario, there may be financial redemption in the small claims court, according to Joshua Browder, CEO of DoNotPay, a so-called “robo-lawyer” who helps people file smaller lawsuits. of artificial intelligence.
The service, which is also supported by some of crypto’s biggest players such as venture giant Andressen Horowitz (a16z) and FTX founder and CEO Sam Bankman-Fried, charges a fee for the service and has received over 1,000 claims since Monday morning. against Celsius last week.
Browder told Yahoo Finance that if the lender does not file for bankruptcy within the next two months, small creditors can “actually get their money back from [Celsius’] corporate bank account before anyone else. “
Even if Celsius goes bankrupt, Browder claimed, the verdict for small claims lawsuits – $ 10,000 to $ 25,000 based on government regulations – takes precedence over other unsecured creditors.
“Unless Celsius shows up at your lawsuit, investors will win by default. Remember, Celsius is completely flooded right now,” Browder said. “I do not think they are going to send leaders across the country to defend themselves against a $ 10,000 lawsuit.”
Tipene is a loyal supporter of the legal effort, and can not even file a small claims case in a US court because he lives in Australia. Instead, Tipene has given up hope of seeing his remaining assets, even after his second loan settlement, which he said he could not meet in time.
“Bitcoin could fall to $ 10 and it would not bother me because I think it will go up again,” he said. “It’s these companies. They play with people’s money, and they should not get away with it. “
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.
Click here for the latest cryptocurrency news, updates, values, prices and more related to Bitcoin, Ethereum, Dogecoin, DeFi and NFTs
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedInand YouTube
